Gammon IPO to hit market soon

Sebi's one-year ban on company accessing capital mart ended in Dec 2007.

Decks have been cleared for the initial public offer (IPO) of Gammon Infrastructure Projects.

According to sources close to the development, the company would be hitting the markets with the public issue shortly.

Gammon Infrastructure Projects, a unit of construction firm Gammon India, has been looking to raise funds through an IPO for quite some time.

However, its public offer plans ran into trouble as the market regulator barred Gammon India and its promoter-Chariman Abhijit Rajan from accessing the capital markets for a year in December 2006.

The Securities and Exchange Board of India's (Sebi) move to bar Gammon followed charges that the latter was routing the company's funds to subscribe to its rights issue.

In February 2007, the company moved the Securities Appellate Tribunal (SAT), which stayed the Sebi order.

Last October, the company re-filed the prospectus with Sebi. Moreover, the one-year ban came to an end in December 2007, allowing the company to go ahead with its plans.

SSKI Corporate Finance and Macquarie India Advisory Services are the lead managers to the issue.

The company is planning to raise about Rs 350-400 crore through the IPO to fund its expansion plans.

According to the prospectus filed last year, the company will be offering 16,550,000 shares of Rs 10 each, diluting 11.45 per cent of the fully diluted post-issue equity capital.

Gammon Infrastructure, the holding company for Gammon's investments in the infrastructure segment that range from ports to power units, had diluted a 12.5 per cent stake to US -based hedge fund Ochziff three years ago. The promoters will hold 73.05 per cent after the issue.

The company has identified projects for urban infrastructure, airports, special economic zones, water and waste management, power transmission lines, railways and agricultural infrastructure.

Construction companies are spinning off their infrastructure businesses into separate companies and listing them on the stock exchange in a bid to realise the untapped value.

The economic growth has fuelled demand for infrastructure services, which, in turn, has led to the increased demand in sectors such as power, roads, ports and telecom.

The government has estimated that the country's infrastructure requires around $500 billion over the next five years to sustain a 9 per cent GDP growth rate.